Correlation Between Cummins and Regal Beloit
Can any of the company-specific risk be diversified away by investing in both Cummins and Regal Beloit at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Cummins and Regal Beloit into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cummins and Regal Beloit, you can compare the effects of market volatilities on Cummins and Regal Beloit and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Cummins with a short position of Regal Beloit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cummins and Regal Beloit.
Diversification Opportunities for Cummins and Regal Beloit
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cummins and Regal is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Cummins and Regal Beloit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regal Beloit and Cummins is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Cummins are associated (or correlated) with Regal Beloit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regal Beloit has no effect on the direction of Cummins i.e., Cummins and Regal Beloit go up and down completely randomly.
Pair Corralation between Cummins and Regal Beloit
Considering the 90-day investment horizon Cummins is expected to generate 0.82 times more return on investment than Regal Beloit. However, Cummins is 1.22 times less risky than Regal Beloit. It trades about 0.26 of its potential returns per unit of risk. Regal Beloit is currently generating about 0.02 per unit of risk. If you would invest 33,020 in Cummins on August 31, 2024 and sell it today you would earn a total of 4,083 from holding Cummins or generate 12.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cummins vs. Regal Beloit
Performance |
| Timeline |
| Cummins |
| Regal Beloit |
Cummins and Regal Beloit Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cummins and Regal Beloit
The main advantage of trading using opposite Cummins and Regal Beloit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cummins position performs unexpectedly, Regal Beloit can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Regal Beloit will offset losses from the drop in Regal Beloit's long position.| Cummins vs. Flowserve | Cummins vs. Franklin Electric Co | Cummins vs. Watts Water Technologies | Cummins vs. Gorman Rupp |
| Regal Beloit vs. IDEX Corporation | Regal Beloit vs. Watts Water Technologies | Regal Beloit vs. Donaldson | Regal Beloit vs. Gorman Rupp |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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